Lion Air's JV In Malaysia Falls Through

Indonesian low-cost carrier Lion Air and Malaysian travel conglomerate Berjaya Group have abandoned plans to enter Malaysia’s low-cost carrier market, and AirAsia’s investment flag carrier Malaysia Airlines (MAS) may be one of the reasons.

Lion Air and Berjaya announced in early June that they planned to transform Berjaya Air, a small turboprop operator, into a low-cost carrier operating ATR 72-500s and Boeing 737-900ERs. Lion Air was to own 49% of the airline, they said at the time.

But Berjaya Group has disclosed that the deal has been terminated. In a statement to the Malaysian stock exchange, Berjaya failed to give a reason except to say both parties were unable to finalize the terms of the agreement and other related arrangements. Berjaya is a large travel conglomerate that owns hotels and other properties in addition to Berjaya Air, a small carrier that mostly operates de Havilland Canada Dash 7s to coastal areas where Berjaya has resorts.

When contacted by Aviation Week, Berjaya Air General Manager Adelie Li declined to comment on why the deal with Lion Air fell through.

Industry executives close to Lion Air, however, say that the Indonesian carrier thought twice about entering the market after Malaysian low-cost carrier AirAsia announced in early August it had reached a collaboration agreement with national carrier Malaysia Airlines to carve up the Malaysian airline market between them. It is clear AirAsia is now influential in Malaysian government circles, something an outsider like Lion Air could never hope to match.

AirAsia CEO Tony Fernandes and business partner Kamurudin Meranun own 20.5% of MAS. In the past several months, AirAsia and MAS have discussed collaborating on maintenance, repair and overhaul, pilot training and ground services to achieve cost savings. In addition, Fernandes is considering launching a premium service carrier targeted at business travelers and he may try to involve MAS in the new carrier.